TODAY’S FAYRE – Wednesday, 29th October 2014

“SHE walks in beauty, like the night
Of cloudless climes and starry skies;
And all that ‘s best of dark and bright
Meet in her aspect and her eyes:
Thus mellow’d to that tender light
Which heaven to gaudy day denies.
One shade the more, one ray the less,
Had half impair’d the nameless grace
Which waves in every raven tress,
Or softly lightens o’er her face;
Where thoughts serenely sweet express
How pure, how dear their dwelling-place.

And on that cheek, and o’er that brow,
So soft, so calm, yet eloquent,
The smiles that win, the tints that glow,
But tell of days in goodness spent,
A mind at peace with all below,
A heart whose love is innocent!”

George Gordon, Lord Byron – poet – 1788-1824

Smaller companies are the main beneficiaries in a bull market due to a lack of liquidity. In a bear market they suffer more! The Aim 100 index has fallen 21.3 per cent this year, but rebounded 3.3 per cent last week, after seven straight weeks of losses.

On the way to Spain I sat next to Dennis Waterman, the actor famous for his portrayal of Terry in ‘Minder’ as well as John Thaw’s side kick in ‘The Sweeny’ and more recently in ‘New Trick.’ He never addressed a word to me and why should he? However he read the Daily Mail and the Telegraph from cover to cover. I think he might vote Conservative!

The vibes from the current FOMC meeting seem to be relatively dovish, which may well explain why equities have been on such good terms with themselves in the past few sessions, particularly yesterday, when the DOW rose by 1.13%, the S&P 500 by 1.19% and the NASDAQ by 1.85%. FED chairman Janet Yellen is expected to announce that the final $15 billion monthly QE facility will be withdrawn. Market activists and cognoscente in this arena tell us that rates are unlikely to go up before July 2015. What we don’t know is whether the withdrawal of QE will adversely affect the value of equities. US equities since 9th March 2009 have outstripped GDP by a ratio of five to one! Certainly the quality of earnings was decent yesterday and the improvement in Consumer Confidence gave credence to the strong rally.

Though Pfizer’s sales were down 2% at $7.6 billion, CEO Ian Read certainly left his calling card to the effect that Pfizer was not yet done with Astra Zeneca and there was more to talk about. After hours Facebook’s numbers did not pass muster. The outlook for growth has contracted and costs are increasing. So investors vented their spleen on Facebook by taking the shares down by 9.5%, despite a 90% increase in profits to $806 million. Also Linkedin fell by 2%, Twitter by another 2.2% and Amazon by 0.88%.

Yesterday the FTSE added 38 points to 6402. Miners were in good form. Punters latched on to Vodafone +3% over loose chat about the acquisition of TalkTalk. Investors in Salamander Energy, who are probably ‘under-water’ enjoyed the 6% rally, as its shares flirted with 100p on takeover gossip. The Lloyds PR bandwagon was all about damage limitation on its 9000 redundancy plans. Initially the shares were easier by 5%, but at the close they were up 0.61%. Job done, but I think the policy is a ‘nonsense!’ How can you evaluate your customer if you rarely if ever meet him/her? I even found myself in agreement with Dr Vince Cable that no town/conurbation should be left without a branch of a bank. Now there’s a surprise!

Standard Chartered Shareholders were in no mood to accept the 16% fall in profits without retribution. The shares were clattered by 10%. Peter Sands must now be under the cosh. Considering the cumuli nimbus clouds that hang over BP’s assets in the Gulf of Mexico and in its investment in Rosneft plus the 20% drop in oil prices, the market seemed happy with yesterday’s numbers. On the economic front Deputy Governor Sir Jon Cunliffe joined the BOE bandwagon in stating that interest rates were unlikely to rise in the foreseeable future, endorsing similar comments made by his colleague Minouche Shakik. The lack of wage inflation continues to be a concern. Today BOE banking lending figures are expected to filter in to the domain.

This morning Deutsche Bank posted a loss of E94 million for the last quarter. This German titan has been heavily involved in litigation and was rather smug about getting through the stress test. Investors took a different view this morning taking the stock down 2% in early skirmishes, despite the implementation of management changes. NEXT’s sales were a tad disappointing due to the clement warm weather – sales were up 5.4% in the last quarter against hopeful estimates of 10%. Retail sales were up 2.4% and the Directory by 9.7%. Shares were easier by 3%. This stock has been a barnstormer in the last 3 years up from £27 to £63! Well done Lord Wolfson! We suspect this is a temporary aberration. Finally Standard Life saw inflows increase by £3.4 billion to £290 billion. The market perceived this performance as rather neutral – shares down 1%.

Next week the following UK companies post results – Thursday – AVIVA, BARCLAYS, ROYAL DUTCH SHELL, ST JAMES’S PLACE, CAIRN ENERGY, KAZAKHMYS, SMITH & NEPHEW, Friday – DIRECT LINE, RBS.


These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
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